Baring Brothers & Co. and Japanese Railway Investments, 1901-1906

Toshio SUZUKI

doi:10.5029/jrbh1984.11.53

Toshio SUZUKI

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1995 Volume 11 Pages 53-74

DOI https://doi.org/10.5029/jrbh1984.11.53

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Published: March 15, 1995 Received: - Available on J-STAGE: June 28, 2010 Accepted: - Advance online publication: - Revised: -
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Date of correction: June 28, 2010 Reason for correction: - Correction: CITATION Details: Right : 1I refer to the following commissioned company histories and the studies derived from them:S.J.Diaper,The History of Kleinwort,Sons&Co.in Merchant Banking,1855-1961(Unpublished Ph.D.thesis,University of Nottingham,1983);S.Chapman,The Rise of Merchant Banking(London,1984);P.Ziegler,The Sixth Great Power(New York,1988);K.Burk,Morgan Grenfell1838-1988(Oxford,1989);R.Roberts,Schroders(London,1992).
2Outlines of the introduction of foreign capital into Japanese companies can be found in:Yasuzo Horie,Gaishi yunyu no kaiko to tenbo[The import of foreign capital:Recollection and prospect](Tokyo,1950);Nippon Kogyo Ginko Gaijibu,ed.,Gaikokugaisha no honpo toshi[Foreign companies'investments in Japan](Tokyo,1948);M.Udagawa,“Business Management and Foreign-Affiliated Companies in Japan before World WarII,”in T.Yuzawa and M.Udagawa,eds.,Foreign Business in,Japan before World WarII(Tokyo,1990),pp.1-30.Masaho Noda,Nihon shoken shijo seiritsu shi[History of the development of the Japanese securities market],pp.172-80,and Isao Ogawa,“Meijiki ni okeru shaseki hakko to hoken kin'yu”[Debenture issues and insurance finance in the Meiji period],Bunken(pub.by the Seimei Hoken Bunka Kenkyujo[Institute of life insurance and culture]),no.97(1991),pp.25-92,are the rare studies referring to the introduction of foreign capital into the railways.
3E.V.Morgan&W.A.Thomas,The Stock Exchange(London,1969),table V.
4R.C.Michie,The London and New York Stock Exchanges1850-1914(London,1987),pp.53-55.
5H.Feis,Europe,the World's Banker,1870-1914(New Haven,1930,reprinted1964),p.25.This is clear from Toshio Suzuki,Japanese Government Loan Issues on the London Capital Market,1870-1913(London,1994),table1.1,pp.10-12.
6Public Record Office,FO46/561,Mr Gordon's Report-an Account of the Japanese Railway System in1902.
7J.Clapham,The Bank of England,vol.2(Cambridge,1944),appendix B.Also,see Nihon Ginko hyakunen shi[One-hundred-year history of the Bank of Japan](Tokyo,1986),p.426.
8Diplomatic and Consular Reports(Japan),no.3009(1902),pp.35-36.
9The Anglo-Japanese Gazette,February1904,p.49.
10The Anglo-Japanese Gazette,February1906,p.181.
11J.E.de Becker,De Becker's Japanese Law of Trading Partnerships and Companies(Yokohama,1906),pp.132-33.
12Chugai shogyo shinpo[Domestic and Foreign Commercial News],11May1902,p.2.The British minister in Japan,Macdonald,had warned the Japanese minister in London,Tadasu Hayashi,that unless domestic laws in Japan were revised quickly and foreigners given more rights,no foreigners would invest in Japanese domestic businesses(Public Record Office,FO800/134,Macdonald to Lord Lansdowne,18July1901).
13“Gaikokujin no shojigaisha kabushiki shoyu shikaku ni kanshi Okura daijin no teigi shokai no ken”[Explanation of the Finance Minister's proposal regarding qualification of foreigners to own shares in commercial companies],Nihon gaiko bunsho[Japanese diplomatic record],vol.31no.1(Tokyo,1954),pp.22-29.The companies whose shares foreigners were forbidden to own were the Yokohama Specie Bank,the Agricultural and Industrial Bank,and Japanese national banks.In addition,foreigners were not allowed to engage in milling(as individuals),nor to become members of,shareholders in,or brokers in the various exchanges.
14Tokyo keizai zasshi[Tokyo Economic Journal],no.1034(16June1900),pp.1218-19.
15Japanese Ministry of Foreign Affairs Archives,3-3-2-12,miscellaneous collection related to purchase of debentures of Kyushu and San'yo railway companies by the“Baker[sic]Peacock”company located in England.An article on the matter appeared in Tokyo keizai zasshi[Tokyo Economic Journal],no.955(26November1898),pp.1218-19.
16Tokyo keizai zasshi,no.1098(14September1901),p.553.
17My discussion of these two companies is based on such materials as R.Henriques,Bearsted(New York,1960),pp.49-50,53,60-61,and384;Guildhall Library,Antony Gibbs Archives,MS11,038B,Information Book(M.Samuel);S.Chapman,Merchant Enterprise in Britain(Cambridge,1992),p.209;The Anglo-Japanese Gazette,October1902,p.70,and January1906,pp.157-78.
18For more details see Suzuki,Japanese Government Loan Issues on the London Capital Market,chapters5and8.
19References are made to the principal short-term industrial loans that Marcus Samuel Co.and Samuel Samuel Co.had a hand in,in Ministry of Finance,ed.,Meiji Taisho zaisei shi[History of Japanese finance in the Meiji and Taisho eras],vol.17(Tokyo,1940),pp.37-80;and Y.Hofie,The Import of Foreign Capital:Recollection and Prospect,pp.113-14.In1908Samuel Samuel Co.announced that in the future it would operate as a“financier”rather than as a trading company(Chugai shogyo shinpo,5December1908,p.2).
20Juichi Tsushima,Hoto zuiso[My recollections],no.12(My recollections of Kengo Mori)(Tokyo,1964),pp.251-52;Guildhall Library,Antony Gibbs Archives,MS11,040,Brian Cokayne to Herbert Gibbs,28July1905.
21Tokyo keizai zasshi,no.1339(2June1906),p.920.An article on the popularity of exporting domestic bonds can be found in Chugai shogyo shinpo,3November1907,p.4.
22The1909issue of Nagoya City bonds is an example of this(Lazard Brothers Archives,W94/5,Nagoya).
23Baring Brothers Archives(hereafter cited as BBA),PF297,Macdonald to Lord Revelstoke,19October1903.
24BBA,PF299,Farrer to Sale,5February1904.
25BBA,PF296,Kirby to Baring Brothers,26November1903,and Kirby's Pamphlet,25October1903.
26BBA,COF-05-2-8,Kirby to Baring Brothers,1913(no day or month given).
27Public Record Office,FO800/134,Kirby to Macdonald,3June1901.Baring Brothers&Co.had already been approached in1898in regard to a loan issue of one million pounds by Japan Railway Co.(Ziegler,The Sixth Great Power,p.311).The pressure of international competition became so great in the early twentieth century that it became the general practice for the British Foreign Ministry to give open support to the business operations of British enterprises(D.C.M.Platt,“The Role of the British Consular Service in Overseas Trade,1825-1914,”Economic History Review,2nd ser.,15/3[1963] ,pp.494-512).
28BBA,PF295,Kirby to Macdonald,19July1901;J.Birch&Co.to Baring Brothers,30September1901;Horner to Lord Revelstoke,28October1901.As of1901Kyushu Railway Co.had issued1,643,000yen worth of bonds.Some of these were7%bonds taken over from an amalgamated company,but the greater majority were5% bonds issued by Kyushu Railway Co.itself because of the difficulty of calling for subscriptions.Cf.Ministry of Communications,Department of Railways,ed.,Meiji36nen tetsudokyoku nenpo[Annual report,Department of Railways,1903],reprinted in Masaho Noda et al.,eds.,Meiji-ki tetsudo shi shiryo dai isshu[Meiji railway history documents,first set],vol.8(Tokyo,
29BBA,PF295,J.Birch&Co.to Baring Brothers,30September1901:Also see Tokyo keizai zasshi,no.944(10September1898),pp.572-73,and Makoto Shimizu,“Zaidan teito ho,”in Masao Fukushima et al.,eds.,Koza Nihon kindai ho hattatsu shi[History of the development of modern Japanese law],vol.4(Tokyo,1958),p.110,note14.
30.Ginko tsushinroku[Japanese Bankers' Magazine],no.192(15September1898),pp.701-702;Diplomatic and Consular Reports(Japan),no.2789(1901),p.23.
31Sakae Wagazuma,Kindai ho ni okeru saiken no yuetsuteki chii[The superior position of obligatory rights in modern law](Tokyo,1953),pp.190-91.
32Torajiro Ikeda,Tanpotsuki shasai shintaku ho ron[The Secured Debenture Trust Law](Tokyo1909),pp.1-5.Ikeda was,together with Kiichiro Hiranuma,Councilor in the Ministry of Justice,involved in the drafting of this law;he has admitted that the purpose of enacting this law was to facilitate,together with the enactment of the Railway Mortgage Law,the import of foreign capital.See Kiichiro Ikeda,“Tanpotsuki shasai shintaku ho,”in(Iwanami Shoten)Horilsugaku jiten[(Iwanami Shoten's)Dictionary of Law],vol.3(Tokyo,1936),pp.1811-12.
33BBA,PF298,Farrer to Sale,11April1905.
34J.J.Madden,British Investment in the United States1860-1880(New York,1985);W.Bagehot,Lombard Street,8th ed.(London,1882),p.131.
35Madden,British Investment in the United States,p.244.
36M.Edelstein,Overseas Investment in the Age of High Imperialism(London,1982),pp.124-25and135.
37Madden,British Investment in the United States,p.319.Investments that crossed national boundaries tended to take the form of bonds for which payment of principal and interest was a safe matter,owing to the fact that the flow of information to the investor was not very abundantin such cases.See J.B.Baskin,“The Development of Corporate Financial Markets in Britain and the United States,1600-1914:Overcoming Asymmetric Information,”Business History Review,62(1988),p.216.
38Committee on Finance and Industry,Report,1931[Cmd.3897],British Parliamentary Papers1930-31,xiii,para.387.In general the merchant banks had a reputation for approaching industrial financing with a conservative attitude.Lord Revelstoke was extremely wary of getting too heavily committed to industrial financing(Ziegler,The Sixth Great Power,p.286).After the Sino-Japanese War there was a boom in investment of British capital in Japan;“venture capital”investment activities with an eye to future profitability,whose aim was high risks and high returns by making use of investment companies and trust companies,were especially conspicuous.These companies would raise capital in London,with the aim of investing in business companies in Japan or even running businesses in Japan in the form of subsidiaries.Schemes like this for the most part fell through when the boom came to an abrupt end,since they were strongly speculative in nature,“riding on the Japan fever.”See Toyo keizai shinpo[The Oriental Economist],no.368(25February1906),pp.253-54.For a more detailed analysis see Toshio Suzuki,“Meiji-ki tai-Nichi toshi chitkai kikan no kenkyu-Eikei toshi kaisha no katsudo o chushin ni”[Studies on Meiji investment intermediaries,in particular British investment firms],in Hiroshi Shinpo,ed.,Kinsei iko-ki ni okeru keizai,shakai,bunka(tentative title)[Economy,society,and culture in modern transition periods](expected date of publication:March1995,by Keiso Shobo).
39BBA,PF295,Lord Revelstoke to Lord Lansdowne,1January1902.
40BBA,PF295,Hayashi to Horner,10December1901.
41BBA,PF295,Memorandum of Conversation,18December1901.The French Ministry of Foreign Affairs was also interested in Bisset's visit to Japan and in a revision of the mortgage law to facilitate the introduction of foreign capital into Japan(Archives du Ministere des Affaires Etrangeres,NS59,E.Clavery to Delcasse,3March1903).
42BBA,PF295,Baring Brothers to Bisset,16January1902.
43BBA,PF295,Homer to Lord Revelstoke,6March1902.
44BBA,PF295,Bisset to Lord Revelstoke,10April1902.
45BBA,PF295,Conversation at the British Legation with Shibusawa,12and17April1902;The Anglo-Japanese Gazette,July1903,pp.2-4;Shibusawa Eiichi denki shiryo[Biographical material on Eiichi Shibusawa],bekkan dai-ichi nikki[supplement volume,first diary](Tokyo.1966),p.231.
46BBA,PF295,Bisset to Sengoku,12November1902.
47BBA,PF295,ff.150-55;Bisset to Kirby,7August1902.The matter is also referred to in Makoto Shimizu,“Zaidan teito ho,”pp.112-19.
48Shibusawa Eiichi denki shiryo,supplement,first dialy,pp.255-58;Public Record Office FO46/560,Homer to E.Barrington,31July1902.
49BBA,PF295,Bisset to Lord Revelstoke,14May1902.
50BBA,PF295,Bisset to Lord Revelstoke,26July1902;Bisset to Kirby,7August1902.
51Horitsu shinbun[Law newspaper],no.109(20October1902);Tokyo keizai zasshi,no.1131(24May1902),p.962.
52BBA,PF296,Baring to Birch,Kirby&Co.,8April1903.
53The Railway Mortgage Law bill was passed in the House of Peers on17February and in the House of Representatives on the25th;the Secured Debenture Trust Law bill was passed in the House of Representatives on23February and in the House of Peers on the25th.See Teikoku gikai kizokuin giji sokkiroku dai21gikai[Stenographic records of proceedings in the House of Peers,the Imperial Diet,21st session],vol.21(Tokyo,1980),pp.228and285;Teikoku gikai shugiin giji sokkiroku dai21gikai[Stenographic records of proceedings in the House of Representatives,the Imperial Diet,21st session],vol.20(Tokyo,1980),pp.331and345.
54Toyo keizai shinpo,no.346(15July1905),p.900;The Anglo-Japanese Gazette,June1905,p.132and September1905,p.72.
55BBA,PF298,Sale to Baring Brothers,18and27February1905;Farrer to Sale,11April1905.
56BBA,PF296,Sengoku to Kirby,16February1903.
57Bank of Japan,Meiji iko honpo)shuyo keizai lokei[Principal economic statistics for Japan since the Meiji Restoration](Tokyo,1966),p.256.
58Chugai shogyo shinpo,15March1903,p.2.
59These figures are based on Ministry of Communications,Department of Railways,Meiji35nen tetsudokyoku nenpo[Annual report,Department of Railways,1902],reprinted in Masaho Noda et al.,eds.,Meiji-ki tetsudo shi shiryo dai-isshu[Meiji railway history documents,first set],vol.7(Tokyo,1980),p.30,and vol.8in the same series(cited in note28),p.33.
60BBA,PF298,Farrel to Sale,22February1905.
61See,for example,Chugai shogyo shinpo,2July1905,p.4;17September,p.2;5October,p.2;and10January1906,p.3.
62Suzuki,Japanese Government Loan Issues on the London Capital Market,pp.157-59.
63BBA,PF301,Sale&Frazar to Baring Brothers,27December1905.
64Teikoku gikai kizokuin giji sokkiroku dai22gikai[Stenographic records of the proceedings of the House of Peers,the Imperial Diet,22nd session],vol.22(Tokyo,1980),p.420.A member of the House of Peers,Kinjiro Hirosawa,said,“If one tries to introduce foreign bonds by mortgaging railways,I believe that railway nationalization will make this even more inconvenient”(p.220of the same volume).
65BBA,PF301,Sale&Frazar to Baring Brothers,12February1906.
66BBA,PF296,Birch,Kirby&Co.to Baring Brothers,5June1903.
67Chugai shogyo shinpo,17November1905,p.2.
68BBA,PF295,Homer to Kirby,15October1902;Bisset to Farrer,13November1902.
69BBA,PF298,Sale to Baring Brothers,11February1905.
70BBA,PF298,Sale to Baring Brothers,15February1905.
71BBA,PF298,Memorandum from Takahashi,6April1905.A similar memorandum is kept among the Inoue Kaoru Bunsho[Kaoru Inoue Archives]in the Diet Library Constitutional Government Documents Room:Inoue Kaoru Bunsho,686/5.
72BBA,PF298,Farrer to Sale,18March1905.
73Tsukasa Uetsuka,ed.,Takahashi Korekiyo jiden[Autobiography of Korekiyo Takahashi],vol.2(Tokyo,1976),pp.268-69.On the agreement between Hongkong and Shanghai Banking Corporation and Baring Brothers&Co.regarding concerted action on Japanese securities issues,see BBA,PF300,Farrer to Sale,1November1905.After the retirement of the manager of Hongkong and Shanghai Banking Corporation's London office,E.Cameron,business relations between the two companies gradually cooled.
74Suzuki,.japanese Government Loan Issues on the London Capital Marker,pp.147-50.
75BBA,PF301,Sale to Baring Brothers,18May1906.
76Inoue Kaoru Bunsho,686/1,March1903,in the Diet Library Constitutional Government Documents Room.For a similar statement by Soyeda,see Ginko tsushinroku,no.248(15June1906),pp.45-46.
77Toyo keizai shinpo,no.442(5March1908),p.307.
78Toyo keizai shinpo,no.364(15Janumy1906),p.62.

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